CMG Accounting Analysis

Chipotle’s Financial Statements

Chipotle Annual Report

Risk Analysis

Receivables Turnover Ratio:             88.28 Times

Rank:                                                  Strong

Chipotle represents a high turnover ratio indicating its strength in quickly recapturing its debts.  Subsequently, Chipotle’s average collection period for collecting debts outstanding is 4.13 days

Inventory Turnover Ratio                 88.28 Times

Rank:                                                  Moderately Strong

Chipotle exhibits a moderate to strong inventory turnover ratio indicating Chipotle’s strength in effectively managing its inventory load.  Subsequently, Chipotle’s average days to sell inventory is 4.13 days.

Current Ratio:                                                3.3 to 1

Rank:                                                  Strong                                                

Chipotle exhibits a strong current ratio indicating its exceptional strength in its ability to pay short term debts.

Acid-Test Ratio:                                 2.89 to 1

Rank:                                                  Strong                                                

Chipotle exhibits a strong acid-test ratio indicating its exceptional strength in its ability to pay its liabilities with its current quick assets.  Therefore, this company has a significant level of liquidity to cover its current assets with its’ quick assets.

Debt to Equity Ratio                          38.32

Rank:                                                  Strong

Chipotle exhibits a strong debt to equity ratio indicating the company’s strength in ability to use equity to finance its debts.


Profitability Analysis

Gross Profit:                                       37.71%

Rank:                                                  Moderately Strong

Chipotle exhibits a moderately strong gross profit ratio for the industry which indicates that the company is successful in managing its inventory.

 

Profit Margin:                                                9.37%

Rank:                                                  Strong

Chipotle exhibits a very strong profit margin which indicates that the company has a high margin of profit, likely due to its exceptional ability to deliver high quality products, prices and service.

 

Return on Equity                                22.71%

Rank:                                                  Moderately Strong

Chipotle exhibits a moderately strong return on equity ratio for the industry.  Used as a multiplier, this ratio represents that for every $1 invested; Chipotle has earned approximately $0.23 for its investors.

 

Return on Assets                                16.51

Rank:                                                  Moderately Strong

Chipotle exhibits a moderately strong return on assets ratio in the class of comparing restaurants but which shows that the company is efficient in turning its assets into profit.

Price Earnings Ratio                          37.11

Rank:                                                  Strong

Chipotle exhibits a very high price earnings ratio which pushes up the price of the stock and indicates that the market has high hopes for this company’s stock.    More specifically, represents that an investor is willing to pay approximately $37 for every $1 of earnings.

 

Earnings Per. Share                          5.73    

Rank:                                                 Strong                                                

Chipotle exhibits a strong earnings per. share value; a value that is approximately 44% above the previous year’s value in 2009 and approximately 140% of its 2008 value.  This ratio coupled with the strong market for stock purchase indicates future increases in the company’s earnings per. share values.

Conclusion

For the would-be investor who has the money to purchase this pricey stock, statistically, Chipotle proves to be a very strong investment.  This stock continues to deliver impressive growth, with earnings. per. share value that has continued to increase over the past three years.  Additionally, with a strong acid test and current ratios of approximately 3 to 1, Chipotle exhibits a very strong ability to pay current liabilities and short-term debts.


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